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UC Law Science and Technology Journal

Charles Belle

Abstract

The current treatment of all NFTs in legal scholarship as identical digital assets fundamentally misunderstands their varied applications and the new normative expectations they create. The Moonbirds controversy of 2022, where a creator’s unilateral license change affected nearly 20,000 token holders, exemplifies the crisis: token holders believed they owned digital assets that could be controlled and commercialized, but existing copyright frameworks treat NFTs merely as licenses subject to creator discretion. Picture for Profile (PFP) Projects—community-based NFT collections involving thousands of tokens often with governance and commercial rights—combine concepts of possession, community governance, and commercialization in ways that challenge traditional intellectual property licensing. Despite industry efforts to create NFTspecific licenses, empirical analysis reveals declining adoption and increasing fragmentation. Current legal scholarship debates whether NFTs should fall under copyright or property law, but such broad categorizations are premature. A better approach is a fact-based analytical framework to distinguish PFP Projects from other NFT types. Such a framework would enable courts to apply appropriate legal doctrines based on the specific NFT type rather than one-size-fits-all solutions that risk stifling innovation or inadequately protecting consumers. This article advocates for American Law Institute (ALI) guidance to create default rules for the $10B, and exponentially growing, NFT market. Guidance from the ALI provides courts with practical tools to navigate potential disputes involving ownership rights, commercial licensing, and decentralized governance while balancing innovation with consumer protection in an evolving digital economy.

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